financial_statement_2012

Shortgrass Library System Financial Statements

December 31, 2012

Management's Responsibility

To the Stakeholders of Shortgrass Library System:

Management is responsible for the preparation and presentation of the accompanying financial statements, including responsibility for

significant accounting judgments and estimates in accordance with Canadian accounting standards for not-for-profit organizations. This

responsibility includes selecting appropriate accounting principles and methods, and making decisions affecting the measurement of

transactions in which objective judgment is required.

In discharging its responsibilities for the integrity and fairness of the financial statements, management designs and maintains the

necessary accounting systems and related internal controls to provide reasonable assurance that transactions are authorized, assets

are safeguarded and financial records are properly maintained to provide reliable information for the preparation of financial statements.

The Board of Trustees is composed entirely of Directors who are neither management nor employees of the Organization. The Board is

responsible for overseeing management in the performance of its financial reporting responsibilities, and for approving the financial

information. The Board fulfils1hese responsibilities by reviewing the financial information prepared by management and discussing

relevant matters with management and external auditors. The Board is also responsible for recommending the appointment of the ,'

Organization's external auditors.

MNP LLP is appointed by the trustees to audit the financial statements and report directly to them; their report follows. The external

auditors have full and free access to, and meet periodically and separately with, both the Board and management to discuss their audit

findings.

April 17, 2013

Independent Auditors' Report

To the Stakeholders of Shortgrass Library System:

We have audited the accompanying financial statements of Shortgrass Library System which comprise the statements of financial position as at December 31, 2012 and the statements of operations, changes in net assets and cash flows, including related schedules, for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management's Responsibilily for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian accounting standards for not-for-profit organizations, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibilily Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those stcfndards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, except for the effects of failing to capitalize and amortize assets as described in the Other Matter Paragraph, the financial statements present fairly, in all material respects, the financial �osition of Shortgrass Library System as at December 31, 2012, and the results of its operations, changes in net assets and its cash flows for the year then ended in accordance with Canadian accounting standards for not-for-profit organizations.

Other Matter Note 3 describes the Organization's accounting policy with respect to capital assets and indicates that the Organization has not adopted the policy of capitalization and amortization as recommended under Canadian generally accepted accounting principles. The informational requirements of the users of the financial statements are more closely met by the current policy of expensing the cost of capital assets fully in the year of acquisition. The amount of adjustment necessary u

'nder Canadian accounting standards for not-for

profit organizations is not readily determinable at this time.

Comparative Information Without modifying our opinion, we draw attention to Note 2 to the financial statements which describes that Shortgrass Library System adopted Canadian accounting standards for not-for-profit organizations on January 1, 2012 with a transition date of January 1, 2011. These standards were applied retrospectively by management to the comparative information in these financial statements, including the statements of financial position as at December 31, 2011 and January 1, 2011 and the statements of operations, changes in net assets, and cash flows for the year ended December 31, 2011 and related disclosures. We were not engaged to report on the restated comparative information and, as such, it is unaudited.

Medicine Hat, Alberta MN?LLP April 17, 2013 Chartered Accountants

Box 580, 666- 4t!J Street SE, Medicine Hat, Alberta, T1A 7G5, Phone: (403) 527-4441, 1 (877) 500-0786

MNP

Assets Current

Cash (Note 4) Marketable securities (Note 5) Accounts receivable Goods and Service Tax receivable Prepaid expenses and deposits

Restricted cash (Note 6)

Liabilities Current

Accounts payable and accruals Deferred revenue (Note 7)

Commitments (Note 8)

Net Assets Internally restricted capital Internally restricted contingency Unrestricted

Shortgrass Library System Statement of Financial Position

2012

110,338 649,077

26 ,977 29,588 52,022

868 ,002

282,155

1 ,1 50,157

88 ,579 72,374

160,953

186 ,559 95,596

707,049

98 9,204

1,150,157

As at December 31, 2012

2011 (Unaudited)

291,579 337,340

62,072 33,917 40,082

764,990

202,236

967,226

84,952 1 11 ,134

196,086

133,492 68,685

568,963

771,140

967,226

January 1 2011

(Unaudited)

1,028 655,800

24,618 36,943 32,466

750,855

183,126

933,981

98,353 199,852

298,205

132,187 50,711

452,878

635,776

933,981

Approved on behalf of the Board

�·�C� I rector �.lbL---Directo

The accompanying notes are an integral part of these financial statements

Revenue APLEN CAP grant - libraries APLEN Grant - SLSHQ Contract services - MHSD #76 & Prairie Rose Datacom reimbursements Donated monies and staff order reimbursements Establishment grant Integrated library system reimbursements Investment income Member library boards materials (Note 10) Member municipalities operational Miscellaneous Provincial grants Special grants Special projects

Expenses APLEN CAP grant expense & capital - libraries APLEN grant expense & capital - SLSHQ Additional resources Advertising Alberta library Board expenses Building costs - repairs, maintenance and supplies Capital purchases Consultancy and programs Contract work - MHSD #76 Contract work - Prairie Rose Donated monies and staff order purchases Establishment grant expenses - capital Insurance - building Library materials Member library manager expense Resource sharing payments Rural services payments . Special grants expense & capital SLSHQ Special projects Telephone Utilities


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Shortgrass Library System Statement of Operations

For the year ended December 31, 2012

2012 2011

3 ,329 31 ,426

111,521 4,344 5,476

16,349 20,614

8,520 417,129 477,979

14,664 527,106 2 9,421

500

1 ,668,378

3,32 9 31,426

7,900 1 1,962

6,181 10,305 33,621

3,828 4,779

11,489 12,359

5,936 16,349

5,693 300,503

5,173 14,000 48,647 29,421

2,950 494

2 5,300

591,645

(Unaudited)

35,566 8,883

108,599 5,595

15,864 36,051 18,278

4,554 488,852 468,748

6,779 521,470

72,910

1 ,792,149

34,301 8,883 5,026

13,361 5,382

13.462 25,332

4,107 8,615 5,124

15,896 36,051

6,148 395,076

6,299 14,000 48,200 24,361

484 27,497

697,605

Continued on next page

Expenses (Continued from previous page)

Administrative Expenditures (Sch edule 1) Tech & Public Services Expenditures (Sch edule 2) Delivery & Communication Expenditures (Sch edule 3)

Total expenses

Excess of revenue over expenses


3

Shortgrass Library System Statement of Operations


2012 2011

591 ,645 697,605

206,278 209,911 550,190 642,429 102,201 106,840

1 ,45 0,314 1,656,785

218,064 135,364

Shortgrass Library System Statement of Changes in Net Assets

For tl7e year ended December 31, 2012

Internally Internally Unrestricted 2012 2011 restricted restricted

capital contingency (Unaudited)

Net assets, beginning of y ear 133,492 68,685 568,963 771 '1 4 0 635,776

Excess of revenue over expenses 218,064 218 ,064 135,364

Transfer of investment income (Note 9) 1,867 9 03 (2,770)

Transfer of funds (Note 9) 51,200 26, 008 (77,2 08)

Net assets, end of y ear 186,559 . 95,596 707, 049 989,204 771,140

Tl1e accompanying nates are an integral part of these financial statements

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Cash provided by ( used for) the following activities Operating

Cash received from customers and funders Cash paid to suppliers Cash paid to employees

Investing Purchase of marketable securities Disposal of marketable securities

Increase (decrease) in cash resources Cash resources, beginning of year

Cash resources, end of year


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Shortgrass Library System Statement of Cash Flows


2012 2011 (Unaudited)

1 ,669,042 1,669,001 (739 ,513) (812,217) (721,884) (867 ,341)

207,645 (10,557)

(1 ,885, 170) (774,692) 1 ,496,284 1,075,800

(388,886) 301,108

(181,241 ) 290,551 291,579 1,028

110,338 291,579

1. Incorporation and nature of the organization

Shortgrass Library System Notes to the Financial Statements


The Shortgrass Library System ("the Organization") is a non-profit, charitable Organization that was incorporated on March 1, 1988. The Organization provides centralized purchasing, cataloguing and distribution services of various library media to its members from its location in Medicine Hat, Alberta. The Organization also provides contract services to third parties.

2. Impact of adopting accounting standards for not-for-profit organizations

These are the Organization's first financial statements prepared in accordance with Canadian accounting standards for notfor-profit organizations (ASNPO). The accounting policies in Note 3 have been applied in preparing the financial statements for the year ended December 31, 2012, the comparative information for the year ended December 31, 2011, and the opening ASNPO balance sheet as at January 1, 2011 (the Organization's date of transition to ASNPO).

In preparing these financial statements, the Organization has not elected to apply any transitional provisions permitted by CICA 1501 First-time adoption by not-for-profit organizations at the date of transition to ASNPO.

The transition to ASNPO had no effect on the statements of financial position and statements of operations of the Organization as compared to amounts that would have been reported under Canadian GAAP.

3. Significant accounting policies

The financial statements have been prepared in accordance with Canadian accounting standards for not-for-profit organizations, except as explained below:

Capital assets

Capital assets are expensed on acquisition and proceeds of disposal are reported as revenue in the year of disposal. Capital assets held include land, building, furniture, equipment, artwork, computers and software, library automation system, and vehicles. During the year, computers and computer eq.uipment, office furniture and other equipment were purchased for a total cost of $36,356 (in 2011 computer equipment, office furniture, and other equipment were purchased for a total cost of $18,363). During the year computer equipment, vehicles and office furniture were disposed for total proceeds of $6,100 (in 2011 computers and computer equipment for no proceeds). These amounts are included in the statement of operations and related schedules under various capital or hardware purchases accounts and miscellaneous revenue.

In addition the Organization has applied the following significant accounting policies:

Cash and cash equivalents

Cash and cash equivalents include balances with banks and short-term investments with original maturities of three months or less. Cash subject to restrictions that prevent its use for current purposes is included in restricted cash.

Marketable securities

Marketable securities consist of Guaranteed Investment Certificates with an original maturity term of greater than three months and are stated at market value. As of December 31, 2012 and December 31, 2011, the market value of these investments approximates cost.

Restricted cash

Restricted cash balance consists of balances with banks and guaranteed investment certificates. As of December 31, 2012 and December 31, 2011, the market value of these investments approximates cost.

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3. Significant accounting policies {Continued from previous page)

Revenue recognition



The Organization follows the deferral method of revenue recognition. Restricted contributions are recognized as revenue in the year in which the related expenses are incurred. Unrestricted contributions and investment income are recognized as revenue when received or receivable if the amount to be received can be reasonably estimated and collection is reasonably assured.

Internally restricted funds

The Organization has internally restricted capital and contingency funds as approved by the Board of Trustees. The Capital Fund is for the purchase of capital items in excess of $1 ,000 if necessary. The Contingency Fund is for unexpected expenditures that result in over-expenditures in the operating fund.

Income taxes

The Organization is registered as a charitable organization under the Income Tax Act (the "Act") and as such is exempt from income taxes and is able to issue donation receipts for income tax purposes. In order to maintain its status as a registered charity under the Act, the Organization must meet certain requirements within the Act. In the opinion of management, these requirements have been met.

Measurement uncertainty

The preparation of financial statements in conformity with Canadian accounting standards for not-for-profit organizations requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Accounts receivable are stated after evaluation as to their collectibility and an appropriate allowance for doubtful accounts is provided where considered necessary. These estimates and assumptions are reviewed periodically and, as adjustments become necessary they are reported in earnings in the periods in which they become known.

Contributed materials and services

Contributed materials and services are recognized in the financial statements when their fair value can be reasonably determined and they are used in the normal course of the Organization's operations and would otherwise have been purchased.

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3. Significant accounting policies (Continued from previous page)

Pension expense



The Shortgrass Library System participates in the Local Authorities Pension Plan (LAPP), which is one of the plans covered by the Alberta Public Sector Pension Plans Act. The LAPP serves about 200,000 people and over 400 employers. The LAPP is financed by employer and employee contributions and by investment earnings of the LAPP Fund.

Contributions for current service are recorded as expenditures in the year in which they become due.

The Organization is required to make current service contributions to the LAPP of 9.91% (9.49% in 2011) of pensionable earnings up to the year's maximum pensionable earnings under the Canadian Pension Plan and 13.74% (13.13% in 2011) on pensionable earnings above this amount. Employees of thf') Organization are required to make current service contributions of 8.91% (8.49% in 2011) of pensionable salary up to the year's maximum pensionable salary and 12.74% {12.13% in 2011) on pensionable salary above this amount.

Total current service contributions by the Organization to the LAPP in 2012 were $56,185 (20 11 - $59,804 ). Total current service contributions by the employees of the Organization to the Local Authorities Pension Plan in 20·12 were $47,307 (2011 - $52,946).

Financial instruments

The Organization recognizes its financial instruments when the Organization becomes party to the contractual provisions of the financial instrument. All financial instruments are initially recorded at their fair value, including financial assets and liabilities originated and issued in a related party transaction with management. Financial assets and liabilities originated and issued in all other related party transactions are initially measured at their carrying or exchange amount in accordance with CICA 3840 Related Party Transactions.

At initial recognition, the Organization may irrevocably elect to subsequently measure any financial instrument at fair value. The Organization has not made such an election during the year.

The Organization subsequently measures investments in equity instruments quoted in an active market and all derivative instruments, except those designated in a qualifying hedging relationship or that are linked to, and must be settled by delivery of, unquoted equity instruments of another entity, at fair value. Fair value is determined by published price quotations. Investments in equity instruments not quoted in an active market and derivatives that are linked to, and must be settled by delivery of, unquoted equity instruments of another entity, are subsequently measured at cost less impairment. With the exception of financial liabilities indexed to a measure of the Organization's performance or value of its equity and those instruments designated at fair value, all other financial assets and liabilities are subsequently measured at amortized cost.

Transaction costs and financing fees directly attributable to the origination, acquisition, issuance or assumption of financial instruments subsequently measured at fair value are immediately recognized in the statement of operations for the current period. Conversely, transaction costs and financing fees are added to the carrying amount for those financial instruments subsequently measured at amortized cost or cost.

Financial assets include cash, marketable securities, accounts receivable and restricted cash.

Financial asset impairment:

The Organization assesses impairment of all of its financial assets measured at cost or amortized cost. The Organization groups assets for impairment testing when available information is not sufficient to permit identification of each individually impaired financial asset in the group. Management considers whether there has been a breach in contract, such as a default or delinquency in interest or principal payments, in determining whether objective evidence of impairment exists. When there is an indication of impairment, the Organization determines whether it has resulted in a significant adverse change in the expected timing or amount of future cash flows during the year. If so, the Organization reduces the carrying amount of any impaired financial assets to the highest of: the present value of cash flows expected to be generated by holding the assets; the amount that could be realized by selling the assets; and the amount expected to be realized by exercising any rights to collateral held against those assets. Any impairment, which is not considered temporary, is included in current year excess of revenues over expenses.

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3. Significant accounting policies (Continued from previous page)

4.

5.

The Organization reverses impairment losses on financial assets when there is a decrease in impairment and the decrease can be objectively related to an event occurring after the impairment loss was recognized. The amount of the reversal is recognized in the excess of revenues over expenses in the year the reversal occurs.

Cash


Cash in bank 110,038 291,279 Petty cash 300 300

110,338 291,579

Marketable securities

Maturity Date Interest Rate 2012 Interest Rate 2011 (Unaudited)

Guaranteed Investment Certificate February 11, 2012 1.20% 60,205 Guaranteed Investment Certificate February 11, 2012 1 .20% 60,205 Guaranteed Investment Certificate February 11, 2012 1.20% 60,205 Guaranteed Investment Certificate February 11, 2012 1.20% 60,205 Guaranteed Investment Certificate December 29, 2012 1.00% 96,519 Guaranteed Investment Certificate January 23, 2013 1.25% 50,180 Guaranteed Investment Certificate January 23, 2013 1.25% 50,180 Guaranteed Investment Certificate January 23, 2013 1.25% 50,180 Guaranteed Investment Certificate January 23, 2013 1.25% 50,180 Guaranteed Investment Certificate January 23, 2013 1.25% 50,180 Guaranteed Investment Certificate January 23, 2013 1.25% 50,180 Guaranteed Investment Certificate January 23, 2013 1.25% 50,180 Guaranteed Investment Certificate January 23, 2013 1.25% 50 ,180 Guaranteed Investment Certificate March 20, 2013 1.20% 20,767 Guaranteed Investment Certificate March 24, 2013 1.20% 75,778 Guaranteed Investment Certificate April 7, 2013 1.20% 40,291 Guaranteed Investment Certificate April 7, 2013 1.20% 40,291 Guaranteed Investment Certificate April 7, 2013 1.20% 50,170 Guaranteed Investment Certificate A�ril10, 2013 1.20% 97, 489

726,226 337,340 Less reclassification to restricted cash {77.149)

649,077 337,340

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6.

7.

Restricted cash

Maturity Date

Cash in Bank Guaranteed ·Investment Certificate February 11, 2012 Guaranteed Investment Certificate February 11, 2012 Guaranteed Investment Certificate February 11, 2012 Guaranteed Investment Certificate February 11, 2012 Guaranteed Investment Certificate February 11, 2012 Guaranteed Investment Certificate February 11, 2012 Guaranteed Investment Certificate December 29,2012 Guaranteed Investment Certificate March 20, 2013 Guaranteed Investment Certificate March 20, 2013 Guaranteed Investment Certificate MaFch 20, 2013 Guaranteed Investment Certificate March 20, 2013 Guaranteed Investment Certificate March 20, 2013 Guaranteed Investment Certificate March 20, 2013 Guaranteed Investment Certificate Aerii10, 2013

Add reclassification from marketable securities



Interest Rate 2012 Interest Rate 2011 (Unaudited)

9 11 1.20% 2,948 1.20% 10,429 1.20% 17,495 1.20% 25,686 1.20% 63,065 1.20% 67,467 0.75% 15,135

1.20% 2,989 1.20% 10,575 1.20% 17,740 1.20% 26,046 1.20% 63,948 1.20% 68,412 1.20% 15,287

205,006 202,236 77,149

282, 155 202,236

The cash and marketable securities have been restricted to fund the internally restricted net assets.

Deferred revenue


Grant revenue 10,736 63,511 Contract revenue 15,307 19,655 Underseent materials budget 46,331 27,968

72,374 111 '134

8. Commitments

The Organization owns the integrated library system in partnership with Chinook Arch Regional Library System. The Organization has committed to share the annual maintenance costs of the system. The upgrade and maintenance costs for the upcoming year that the Organization will be obligated to pay will be approximately $22,601. These costs will be paid out of the Organizations operating funds. These costs are then charged back to the school districts and municipalities that the Organization administers the program for. To terminate participating in the contract, the Organization must deliver written notice and explanation on or before December 31 of any year to become effective December 31 of the year immediately following.

9. Fund transfers

Funds were transferred to internally restricted net assets from unrestricted net assets to account for interest earned on marketable securities held to fund the internally restricted funds. The Board of Trustees also approved transfers of $51,200 from unrestricted net assets to the internally restricted capital fund and $26,008 from unrestricted net assets to the internally restricted contingency fund as of December 31, 2012 ($17,352 from unrestricted net assets to internally restricted contingency fund in 2011 ).

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1 0. Member library boards materials


Annual member library boards materials revenue Prior year unspent amount Current year unspent amount Prior year overspent amount Current year overspent amount

11. Contingencies

437,977 27,968

( 46,331) (5,364)

2,879 417,129

429,826 85,300

(27,968) (3,670)

5,364 488,852

The Organization is contingently liable for corporate credit cards issued with a combined authorized credit limit of $37,000 ($37,000 in 2011 ). The amount charged against this limit at December 31, 2012 is $7,717 ($3,568 in 2011 ). The credit cards bear interest at 19.99% (19.99% in 2011) and are unsecured.

1 2. Financial Instruments

The Organization, as part of its operations, carries a number of financial instruments. It is management's opinion that the Organization is not exposed to significant interest, currency, credit, liquidity or other price risks arising from these financial instruments except as otherwise disclosed.

Credit concentration

As at December 31, 2012, one customer and funder aGcounted for 58% (2011 - three customers and funders for 70%) of the accounts receivable. The Organization believes that there is no unusual exposure associated with the collection of these receivables. The Organization performs regular credit assessments of its customers and provides allowances for potentially uncollectible accounts receivable.

Fair value of financial instruments

The c arrying amount of cash, restricted cash, marketable securities, accounts receivable, accounts payable and accruals approximates their fair value due to the short-term maturities of these items.

Interest rate risk

Interest rate risk is the risk that the value of a financial instrument might be adversely affected by a change in the interest rates. In seeking to minimize the risks from interest rate fluctuations, the Organization manages exposure through its normal operating and financing activities.

Risk management policy

The Organization, as part of operations, has established avoidance of debt as risk management objectives. In seeking to meet this objectives, the Organization follows a risk management policy approved by its Board of Trustees.

13. Comparative figures

Certain comparative figures have been reclassified to conform with current year presentation. The only significant reclassification in 2011 was to reclassify $240,821 of GIG's from cash to marketable securities.

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Administrative Expenditures Advertising Computer software purchase and repair Conferences and workshops Dues and memberships Interest and bank charges Professional fees Repairs and maintenance Salaries, wages and benefits Stationary supplies and photocopying Travel

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Shortgrass Library System Schedule 1 - Administrative Expenditures


2012 2011

494 1,583

12,098 1,731

504 19,154

1,459 160,076

1,075 8,104

206,278

(Unaudited)

8,013 2,190

10,205 3,093 1,299

15,472 287

159,375 4,906 5,074

209,911

Tech & Public Services Expenditures Cataloguing tools and software Computer hardware Repairs and maintenance Salaries and benefits Salaries and benefits - project cataloguer Stationary supplies and photocopying Supplies - processing Technology software and support

Shortgrass Library System Schedule 2- Tech & Public Services Expenditures


13

2012 2011

10 ,998 596 289

506 ,917 10,502

1,219 9,862 9 ,847

550,190

(Unaudited)

11,861 695 250

622,134 1,020 2,658 3,767

44

642,429

Delivery & Communication Expenditures Data communications Fax

Shortgrass Library System Schedule 3 - Delivery & Communication Expenditures


2012 2011

430

(Unaudited)

950 433

Integrated library system repairs and maintenance Internet

32, 462 7,3 92 1,590 3,619

15,590 8,647 1,266 6,571

Postage Rent - telephone Salaries and benefits Vehicle

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33,414 23,294

102,201

47,644 25,739

106,840

Documents

financial_statement_2012